IIFL Finance has recently caught the attention of investors, delivering a strong return of 63% over the past six months. The company’s shares closed at ₹530.75 on the BSE last Friday, recording a solid jump of 7.37% in a single day. With this rally, the company’s market cap has swelled to ₹22,516 crore. However, market analysts believe that there is still room for further growth in this stock, especially following a key regulatory development from the Reserve Bank of India (RBI).
Positive Outlook for IIFL Finance Stock
Leading brokerage firm Motilal Oswal is optimistic about IIFL Finance’s future performance. In its latest research report, dated 19 September 2024, the brokerage has given a “Buy” rating for the stock, with a target price of ₹600. This implies a potential upside of around 13% from its current levels. Investors looking for steady growth can consider this stock as part of their portfolio.
RBI Lifts Restrictions on Gold Loan Business
A significant factor contributing to the bullish outlook on IIFL Finance is the recent decision by the RBI to lift the restrictions on the company’s gold loan business. Back in March 2024, the RBI had imposed certain limitations on IIFL Finance, citing non-compliance with specific regulations in its gold loan operations. These restrictions had a considerable impact on the company’s ability to expand its gold loan business.
With the RBI’s recent decision to remove these restrictions, IIFL Finance can now resume its full-scale gold loan operations, a segment that is crucial to its overall business strategy. The company has already begun approving, distributing, and selling gold loans, marking a fresh start for its gold loan business.
Impact on Gold Loan AUM and Market Share
According to Motilal Oswal, IIFL Finance’s gold loan assets under management (AUM) had dropped significantly due to the RBI’s restrictions. When the restrictions were imposed in March, the AUM stood at approximately ₹260 billion, but this figure fell to around ₹122 billion by August 2024. The brokerage expects the company’s gold loan AUM to be around ₹105 billion by the time the ban was lifted in mid-September.
Now that the restrictions are gone, IIFL Finance is expected to regain lost ground in the gold lending business and reclaim its market share from key competitors like Muthoot Finance and Manappuram Finance, as well as several banks. While there may be short-term challenges in terms of profitability, especially if IIFL adopts aggressive pricing measures to attract customers, the long-term outlook remains positive.
Recent Performance of IIFL Finance Shares
IIFL Finance has shown solid performance in the stock market, rising over 14% in the past month alone. Over the last six months, the stock has gained a robust 63%, indicating strong investor confidence. Despite these gains, the company’s shares have seen a slight decline in the broader timeframe—falling by over 9% so far this year and approximately 7% over the last 12 months.
The recent rally, however, suggests that investor sentiment around the stock has shifted, especially after the RBI’s favorable decision. With the brokerage community expecting further upside, it seems that IIFL Finance has the potential to deliver even more returns in the coming months.
A Stock to Watch
For investors seeking a stock with growth potential, IIFL Finance presents an attractive opportunity. The lifting of restrictions on its gold loan business, along with the positive outlook from leading brokerage firms, indicates that this stock could offer substantial returns in the near future. Keep an eye on IIFL Finance as it continues to build momentum and regain its position in the competitive gold loan market.
